AETNA ANNOUNCES 4,400 JOBS WILL BE CUT.

Byline: Milt Freudenheim The New York Times

In one of the largest job cutbacks in the health care and insurance industries, Aetna Inc. said Thursday that it will reduce its work force by 4,400 jobs or 13 percent of its 33,700 employees.

In its fourth big layoff announcement this year, the Hartford, Conn.-based company said it will lay off a total of 8,200, but retrain 3,800 of them for newly created positions.

The decision brought the number of layoffs planned this year to more than 10,800. More than 1,000 jobs already were being cut.

Aetna's relentless downsizing - exceeded only by AT&T's announcement in January that it will cut 40,000 jobs - reflects the company's struggle to transform itself from a provider of traditional insurance and financial services into a leader in managed health care.

In April, Aetna announced it would spend $8.18 billion to acquire U.S. Healthcare, a major health maintenance organization concentrated in New York, New Jersey and Pennsylvania.

At that time, Aetna Chairman Ronald Compton suggested that the number of jobs lost in the merger would probably be minimal, though he said that ``as we streamline, there are bound to be some.''

Job cuts announced Thursday include 7,500 in health care, mainly from the Aetna side, and 700 in Aetna Retirement Services.

Company officials said Aetna U.S. Healthcare, its health benefits subsidiary, will add 3,500 new positions, for a net reduction of 4,000. Retirement Services will add 300 new slots for a net loss of 400.

In Southern California, an Aetna operations center in Loma Linda will be closed. Employing nearly 300 people, the San Bernardino County center's sales, marketing and billing center will be shifted to Fresno in the next 12 to 18 months.

``Employees in Loma Linda will be encouraged to apply for job openings in other Aetna centers,'' said company spokeswoman Jill Griffiths. ``But I'm not sure how many positions will be open at these other locations.''

Aetna spokeswoman Joyce Oberdorf said employees to be laid off would be offered retraining and priority in the new hiring, but, as for those losing jobs in Loma Linda, most of the new jobs will be far away.

Compton said the reorganization would help Aetna carve out a major role in the highly competitive world of managed care at a time when all HMOs are under intense pressure to prevent costs from rising.

``Over the long term,'' he said, ``we believe this growth will result in more job opportunities.''

But Mark Puccia, a managing director with Standard & Poor's, the credit rating firm, said there will be growing pains.

``Aetna paid a price far greater than most people would ever want to pay for U.S. Healthcare. Now they have to justify it. They have to look for cost reductions to get their earnings up.''

The combination with U.S. Healthcare made Aetna the country's biggest medical benefits company, but analysts said the merger, completed in July, brought together two companies far apart in methods and philosophy.

``U.S. Healthcare had the best operating systems in the business,'' said Margo Vignola, a health care analyst with Merrill Lynch. ``The big question is whether these two organizations can be readily integrated.''

The insurance industry, with its huge armies of white-collar workers, is in the midst of a major consolidation that has forced companies to eliminate tens of thousands of jobs.

In some of the biggest insurance layoffs in the last three years, CNA Corp. eliminated 6,000 jobs, Prudential cut 3,500 employees, Travelers laid off 3,300 and Continental Corp. cut 2,000 positions, according to Challenger, Gray & Christmas, an executive placement firm based in Chicago.

Aetna has been struggling to reshape itself for the last four years. It eliminated 4,800 jobs in 1992 and 1993 and cut 4,000 more in 1994.

Last year the company sold its property and casualty business, which had 11,000 employees, to Travelers for $4.1 billion. In addition to the 475 headquarters jobs eliminated earlier this year as part of that deal, Aetna has also announced this year the demise of 1,700 jobs processing claims for the Federal Medicare insurance program and 500 more in health technology.

Aetna said Thursday that it would write off $307 million in after-tax earnings this year to cover the costs of the latest job cuts, including $167 million in payments to people leaving the company. They will get a severance package that includes a minimum of 13 weeks' pay for regular employees and 30 weeks for executives. Employees will also receive additional payments, depending on the number of the years they have worked at the company.

In trading on the New York Stock Exchange, shares in Aetna declined 87.5 cents, closing at $66.875.